WT/DS299/R Page Vii

WT/DS299/R
Page vii

World Trade
Organization
WT/DS299/R
17 June 2005
(05-2366)
Original: English

EUROPEAN COMMUNITIES – COUNTERVAILING

MEASURES ON DYNAMIC RANDOM ACCESS

MEMORY CHIPS FROM KOREA

(WT/DS299)

Report of the Panel

WT/DS299/R
Page vii

TABLE OF CONTENTS

Page

I. introduction 1

A. complaint of korea 1

B. establishment and composition of the panel 1

C. panel proceedings 2

II. FACTUAL ASPECTS 2

III. parties' requests for findings and recommendations 3

A. korea 3

B. European communities 3

IV. ARGUMENTS OF THE PARTIES 4

V. ARGUMENTS OF THE THIRD PARTIES 4

VI. interim review 4

A. Korea comments 4

B. EC comments 6

VII. FINDINGS 7

A. General issues 8

1. Standard of Review 8

2. Burden of Proof 9

B. Claims concerning the EC's Subsidy determination 9

1. Claim regarding the EC's determinations of the existence of a financial contribution by the government 11

(a) Korea 11

(i) General standard of entrustment or direction under Article 1.1(a)1(iv) of the SCM Agreement 11

(ii) Syndicated Loan 12

(iii) KEIC Guarantee 12

(iv) KDB Debenture Programme 13

(v) May 2001 Restructuring Programme 13

(vi) October 2001 Restructuring Programme 14

(b) EC 15

(i) General standard of entrustment or direction under Article 1.1(a)1(iv) of the SCM Agreement 15

(ii) Syndicated Loan 16

(iii) KEIC Guarantee 17

(iv) KDB Debenture Programme 17

(v) May 2001 Restructuring Programme 17

(vi) October 2001 Restructuring Programme 18

(i) General standard of entrustment or direction under Article 1.1(a)1(iv) of the SCM Agreement 20

(ii) Syndicated Loan 24

(iii) KEIC Guarantee 30

(iv) KDB Debenture Programme 31

(v) May 2001 Restructuring Programme 33

(vi) October 2001 Restructuring Programme 38

Woori Bank 40

Chohung Bank 42

KEB 44

NACF 45

Citibank 45

Conclusion 48

2. Claims regarding the EC's determinations of the existence and amount of benefit 48

(a) Korea 48

Syndicated Loan 49

KEIC Guarantee 49

KDB Debenture Programme 49

May 2001 Restructuring Programme 49

October 2001 Restructuring Programme 50

Additional calculation errors 50

(b) EC 50

Syndicated Loan 52

KEIC Guarantee 52

KDB Debenture Programme 52

May 2001 Restructuring Programme 53

October 2001 Restructuring Programme 53

Additional calculation errors 54

(i) Existence of a benefit in the sense of Article 1.1(b) of the SCM Agreement 56

Syndicated Loan 56

KEIC Guarantee 58

KDB Debenture Programme 60

May 2001 Restructuring Programme 63

October 2001 Restructuring Programme 64

(ii) Calculation of the amount of the benefit – The EC's grant methodology 66

3. Claim regarding the EC's determinations on specificity 67

(a) Korea 67

(b) EC 68

4. Claim regarding Articles 19.4 of the SCM Agreement and VI:3 of the GATT 1994 71

(a) Korea 71

(b) EC 71

5. Claim regarding the EC's application of "facts available" 72

(a) Korea 72

(b) EC 73

(i) Economic Ministers' meetings / Attendance by an FSS official at a creditors' meeting 75

(ii) The Arthur Andersen report 76

(iii) Citibank 78

C. Claims concerning the EC's Injury and Causality Determinations 80

1. Claim concerning Article 15.1 of the SCM Agreement 80

(a) Korea 80

(b) EC 81

2. Claim concerning the EC's determination regarding the volume of the subsidized imports 83

(a) Korea 83

(b) EC 84

(i) Was the consideration based on data regarding subsidized imports? 85

(ii) Should data on imports of DRAMs produced or exported by LGS have been combined with that of Hynix for the purpose of carrying out the consideration required under Article 15.2? 88

(iii) Does the EC determination properly conclude that the increase was "significant" in terms of Article 15.2? 90

(d) Conclusion 91

3. Claim regarding the EC's determination concerning the effect of the subsidized imports on prices 91

(a) Korea 91

(b) EC 93

(i) Impossibility to reconcile market dynamics with the EC's conclusion that Hynix's imports had an effect on domestic prices 94

(ii) Absence of a "price leader" in the DRAMs market 95

(iii) Whether the EC's methodology complied with the requirements in paragraphs 1 and 2 of Article 15 95

(iv) Other factors that affect DRAMs prices 98

(v) Refusal to extend the injury POI 99

(d) Conclusion 100

4. Claim regarding the EC's determination on the condition of the domestic industry 100

(a) Korea 100

(b) EC 101

(i) Evaluation of certain economic factors: Economic downturn/Business cycle, Export performance and Wages 102

Wages 103

Other factors 104

(ii) Infineon statements 105

(iii) Overall assessment of the state of the domestic industry 105

(d) Conclusion 107

5. Claim regarding the EC's causation determination 108

(a) Korea 108

(i) Causation determination 108

(ii) Non-attribution/Examination of "any known factors other than the subsidized imports" 108

Treatment of the drop in demand 109

"Inventory burn" 109

Changes in relative capacity 109

The volume of unsubsidized imports/Samsung's imports 109

(b) EC 110

(i) Causation determination 110

(ii) Non-attribution/Examination of "any known factors other than the subsidized imports" 111

Treatment of the drop in demand 111

"Inventory burn" 111

Changes in relative capacity 111

The volume of unsubsidized imports/Samsung's imports 111

(i) Whether the EC properly demonstrated the existence of a causal relationship between subsidized imports and injury 113

(ii) Whether the EC's causation analysis satisfies the non-attribution requirement 114

Economic downturn in the market 117

"Inventory burn" 118

Overcapacity 119

Other (non-subsidized) imports 120

(d) Conclusion 124

D. Other claims 124

1. Claim regarding the requirement of adequate public notice 124

(a) Korea 124

(b) EC 124

2. Claim regarding Articles 10 and 32.1 of the SCM Agreement 125

(a) Korea 125

(b) EC 125

VIII. CONCLUSIONS AND RECOMMENDATIONS 125

TABLE OF ANNEXES

ANNEX A

SUBMISSIONS OF PARTIES AND THIRD PARTIES FOR THE

FIRST SUBSTANTIVE MEETING

Contents / Page
Annex A-1 Executive Summary of the Submission of Korea / A-2
Annex A-2 Executive Summary of the Submission of the European Communities / A-11
Annex A-3 Executive Summary of the Third Party Submission of Japan / A-19
Annex A-4 Executive Summary of the Third Party Submission of the United States / A-23

ANNEX B

ORAL STATEMENTS OF PARTIES AND THIRD PARTIES AT THE

FIRST SESSION OF THE FIRST SUBSTANTIVE MEETING

Contents / Page
Annex B-1 Executive Summary of the Statement of Korea / B-2
Annex B-2 Executive Summary of the Statement of the European Communities / B-9
Annex B-3 Third Party Oral Statement of China / B-13
Annex B-4 Third Party Oral Statement of Japan / B-16
Annex B-5 Third Party Oral Statement of Chinese Taipei / B-19
Annex B-6 Third Party Oral Statement of the United States / B-22

ANNEX C

REBUTTAL SUBMISSIONS OF PARTIES

Contents / Page
Annex C-1 Executive Summary of Korea's Rebuttal Submission / C-2
Annex C-2 Executive Summary of the European Communities' Rebuttal Submission / C-12

ANNEX D

ORAL STATEMENTS OF PARTIES AT THE

SECOND SUBSTANTIVE MEETING

Contents / Page
Annex D-1 Executive Summary of the Statement of Korea / D-2
Annex D-2 Executive Summary of the Statement of the European Communities / D-7

ANNEX E

REQUEST FOR THE ESTABLISHMENT

OF A PANEL

Contents / Page
Annex E-1 / Request for the Establishment of a Panel – Document WT/DS299/2 / E-2

ANNEX F

TIMELINE OF EVENTS; SUMMARY OF THE PANEL'S CONCLUSIONS

ON SUBSIDIES AND INJURY

Contents / Page
Annex F-1 / Timeline of Financial Programmes and Salient Events in 2000 and 2001 / F-2
Annex F-2 / Panel's Conclusions as to the WTO Consistency of the EC Determinations on Subsidies / F-3
Annex F-3 / Panel's Conclusions as to the WTO Consistency of the EC Determinations on Injury / F-4

TABLE OF CASES CITED IN THIS REPORT

Short Title / Full Case Title and Citation of Case /
Argentina – Footwear (EC) / Appellate Body report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, adopted 12January2000, DSR2000:I,515
Panel report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/R, adopted 12January2000, as modified by the Appellate Body report, WT/DS121/AB/R, DSR2000:II,575
Argentina – Poultry / Panel report, Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19May2003
Canada – Aircraft / Panel report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/R, adopted 20August1999, as upheld by the Appellate Body report, WT/DS70/AB/R, DSR1999:IV,1443
EC–Bed Linen / Panel report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, WT/DS141/R, adopted 12March2001, as modified by the Appellate Body report, WT/DS141/AB/R, DSR2001:VI, 2077
EC–Bed Linen
(Article21.5 – India) / Appellate Body report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU by India, WT/DS141/AB/RW, adopted 24April2003
EC – Hormones / Appellate Body report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13February1998, DSR1998:I,135
EC – Tube or Pipe Fittings / Appellate Body report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/AB/R, adopted 18August2003
Panel report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, adopted 18August 2003, as modified by the Appellate Body report, WT/DS219/AB/R
Egypt – Steel Rebar / Panel report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, adopted 1October2002
Mexico – Corn Syrup / Panel report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States, WT/DS132/R and Corr.1, adopted 24February2000, DSR2000:III,1345
Thailand – H-Beams / Appellate Body report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/AB/R, adopted 5April2001, DSR 2001:VII, 2701
Panel report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/R, adopted 5April2001, as modified by the Appellate Body report, WT/DS122/AB/R, DSR 2001:VII, 2741
US – Countervailing duty on DRAMs / Panel report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/R, not yet adopted
US – Export Restraints / Panel report, United States – Measures Treating Exports Restraints as Subsidies, WT/DS194/R and Corr.2, adopted 23August2001, DSR 2001:XI, 5767
US – Hot-Rolled Steel / Appellate Body report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X, 4697
US – Lamb / Appellate Body report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16May2001, DSR 2001:IX, 4051
US – Line Pipe / Appellate Body report, United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R, adopted 8March2002
Panel report, United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/R, adopted 8March2002, as modified by the Appellate Body report, WT/DS202/AB/R
US – Softwood LumberIV / Appellate Body report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17February 2004
US– Softwood LumberVI / Panel report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, WT/DS277/R, adopted 26April 2004
US – Steel Safeguards / Panel report, United States – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258, WT/DS259, adopted 10 December 2003, as modified by the Appellate Body report, WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R
US – Wheat Gluten / Appellate Body report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R, adopted 19January2001, DSR2001:II, 717
US – Wool Shirts and Blouses / Appellate Body report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R and Corr.1, adopted 23May1997, DSR1997:I,323

WT/DS299/R
Page vii

I. introduction

A. complaint of korea

1.1 On 25 July 2003, the Government of Korea ("Korea")[1] requested consultations with the European Communities ("EC") pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), Article 30 of the Agreement on Subsidies and Countervailing Measures ("SCM Agreement"), and Article XXII of the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), with regard to the provisional countervailing measures imposed on dynamic random access memory chips ("DRAMs") from Korea, as announced in Commission Regulation (EC) No. 708/2003 and published in the Official Journal of the EC on 24 April 2003, and with regard to any final measures on the same products.[2] A first round of consultations took place on 21 August 2003.

1.2 On 25 August 2003, Korea requested further consultations with the EC pursuant to Article 4 of the DSU, Article 30 of the SCM Agreement, and Article XXII of the GATT 1994, with regard to the EC's final countervailing measures imposed on DRAMs from Korea, as adopted by the Council on 11August 2003 through Regulation No.1480/2003 and subsequently published in the Official Journal of the EC on 22 August 2003.[3] Korea and the EC held a second round of consultations on 8October2003, but failed to reach a mutually satisfactory resolution of the matter.

1.3 On 19 November 2003, Korea requested the establishment of a Panel to examine the matter.[4]

B. establishment and composition of the panel

1.4 At its meeting on 23 January 2004, the DSB established a Panel in accordance with Article 6 of the DSU and pursuant to the request made by Korea in document WT/DS299/2.

1.5 At that meeting, the parties to the dispute also agreed that the Panel should have standard terms of reference. The terms of reference are, therefore, the following:

"[t]o examine, in the light of the relevant provisions of the covered agreements cited by Korea in document WT/DS299/2, the matter referred by Korea to the DSB in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."